c Nordic Capital Goods 08 June 2004 Sector Update Sector view: Wind Gauge NEUTRAL Growth will come – what about profitability? We have made only minor revisions to our market forecasts – we now expect growth of 2% in 2004 and 31% in 2005 (assuming the extension of the PTC). We remain confident about the long-term growth prospects, with several projects under development in new markets such as Mexico, Taiwan, the Czech Republic, Bulgaria, Hungary and South Korea. The tough competitive landscape is not set to improve – Gamesa and GE VESTAS Wind are moving rapidly into new markets – and it could be further UNDERPERFORM aggravated by a new round of industry consolidation (Bonus and HIGH RISK DKK88 Repower are up for sale). Peter Rothausen +45 32 88 03 20 We expect Vestas’s sales(04) to come in at the low end of the guidance
[email protected] range (EUR2.7bn), but see it falling short of its 5% EBITA guidance (Carnegie: 4%). There is downside to our numbers if US sales do not materialise. We keep the UNDERPERFORM rating. There is huge uncertainty about Vestas’s future profitability and short-term earnings capabilities; there is also a high risk relating to the integration of NEG Micon. The premium valuation (19–20% on 2005e earnings) to the Engineering peer group is unjustified. Please see disclosures at the back of this report Carnegie Securities Research Sector Update Wind Gauge Valuation Change (%) in valuation since 21 January 2004 (last wind gauge) Ch. in EV/EBITA (%) Ch. in Adj. P/E (%) 2003 2004e 2005e 2003 2004e 2005e Vestas n.m.